Fundraising Talk Session February 2021: 18A Q&A
When can we issue an 18A Receipt?
Q: In proposals, can we still offer to put their information on our sites (social media and website) if they donate alongside the 18A certificate?
Q: If you are writing articles or posting on social media about a donation, is that considered them getting something back for the donation?
A: Recognition and association with an organisation is the only benefit a donor can expect when donating (for it to still be classified as a donation). However, there is a line that can be crossed and a point at which it may become a marketing expense and expenses for the donor/client.
Q: A company is allowing us the use of their boardroom/conference room/ stand at their event/ discounted accommodation for meetings as part of their BEE requirements. Would this qualify for a S18A certificate?
A: No. Use of a space for free or offering a rebate on the usual rental does not qualify as it is not a donation of funds or property in kind. ,
donating a stand at an event or use of space for free would not qualify.
Q: We receive a donation of books to be used as teaching resources. Does this qualify for S18A?
A: Yes. Donated books are classified property in kind and qualify for 18A.
Q: Can we issue a donation receipt if a plumber offers their service as a donation without advertising?
A: No. The donation of a service such as time, skill, or effort to a section 18A-approved organisation will not qualify as a deduction for purposes of section 18A since a service is not a donation of funds or property made in kind.
Q: Should we not advocate for 18As for services as these can save our organisations significant funds?
A: You are not currently permitted to issue 18A receipts for services. It seems extremely unlikely to us that this will ever be permitted or drafted into law, as the potential for fraud and difficulty of control is too great; and it does not accord with basic accounting practice for a deduction to be given where services are offered.
Value of the Donation?
Q: If a donor donates a computer, do we put the depreciated value or the value of the item on the donor’s assets register?
A: If the computer is an asset used in the donor’s trade, the value to be used is the lower of the fair market value on the date of donation of the property or the cost to the taxpayer of such property less any allowance (other than an investment allowance) deducted from the income of that taxpayer for that asset.
Q: When you receive a new computer from a computer company, do you issue the 18A to the value of the cost or the sales price?
A: If it has been donated by a business that sells computers as part of their trading stock, the value will be the amount which has been taken into account for that year of assessment for the value of that trading stock forming part of trading stock of the taxpayer under section 22(8)(C) or paragraph 11 of the First Schedule, as appropriate.
Q: If items are near expiry date, but the donor provides us the market value, can we use that as the value?
A: Yes. The value of the donation is taken as the value on the date the donation was made.
Q: Some NGOs state that they do not issue 18As for second-hand items. Only new items. Is this correct?
A: No. The Act allows for items used by donor in conducting their trade (but are not trading stock) such as used computers, crockery, cash registers,
garden equipment etc. to give rise to 18A receipts. Only issuing 18As for new items is too restrictive an interpretation, and not required by SARS.
Q: Is it correct to issue a s18A on scrapped goods (goods that were damaged and written off on the company's side)? Is it the legal obligation of the NPO to discover if the corporate has written off the item?
A: When the donated item is trading stock, the value will be the lower value of the fair market value or the cost to the donor. However, it is not
the responsibility of the organisation receiving the donation to verify that the value is the lower of the two or do investigations into how the donation will be recorded in terms of the donor’s internal accounting systems.
Other s18A Questions
Q: If somebody donated an item like a computer, do they need to give us an invoice before we can give them an 18A?
A: The organisation is not legally obligated to require an invoice to issue an 18A certificate. Where a donor whose financial system requires a document reflecting the value, they will do so and the organisation will use that as the value. However, where the issuing of an invoice is not
required by a donor system, the organisation must merely request the value of the items in writing.
Q: May we use a PO Box in the address section, or must it be a street/physical address?
A: The SARS guide is not specific and merely refers to an ‘address’ of the donor. Our feeling is that a P.O box address may be used in this case.
Q: We issue receipts on request, but sometimes donors request these two or three years down the line. Can you still issue and update your tax receipt schedule for the relevant years - and update subsequent returns?
A: Receipts can be issued at any time but must be factually correct (ie. must record the actual date of donation).
Q: is it abuse for an organization to use the 18A certificate if the donation does not affect the beneficiaries directly?
A: An 18A receipt may be issued if funds are used to carry on public benefit activities. Part of the carrying-on of activities are the admin, staffing,
head office or ‘care’ costs of developing and running your programmes/projects.
Q: Why is small business funding not a section 18A activity?
A: These organisations will qualify for tax exempt status as small business funders under section 10(1)(cQ) of the Act. Their activities are not classified as PBAs and 18A status is not attainable for them. And one organisation cannot be exempted under 10(1)(cN) and 10(1)(cQ). There is some room for (very) small business funding as a PBA under 1(p) of the PBA list. It is important that the application for exemption is properly framed, so it is not granted under 10(1)(cQ).
Q: Is there a list of tax-deductible services that a company can offer an NGO so that they can still get a benefit from SARS despite not being able to get an 18A?
A: No 18A deduction is available for a donation of time. Whether time donated would qualify for another sort of deduction depends on whether it could be seen as expenditure incurred in the production of income.
Q: Are we as a PBO and 18A Organisation allowed to partner with non-18A status organisations locally? Does this affect our audit?
A: Yes, you can partner with non-18A status organisations. It must, however, be made clear that the 18A funds donated are being used for 18A activities only. You cannot donate them to organisations which have not got 18A status.
Q: If we partner with a local foundation, but we are ONLY the transport conduit, i.e. this foundation has their own project that they are fundraising for independently, but they want to partner with us to use our transport and carry out the project under our flag - should we expect them to pay for the use of our transport or to subsidize our administrative costs? We don't understand what this would look like when audited.
A: It is very common to charge an administration for hosting/ assisting with implementation of projects of (usually unregistered) organisations. It is also common for non-profits to sub-contract parts of projects to other non-profits. The accounting and tax treatment of the charge/cost of year participation depends on the nature of the agreements entered into:
- If your organisation is sub-granted (or a co-grantee) then the funds would be donations/grants received and would be recorded as such and non-taxable.
- If your organisation is providing and being paid a service, then the funds received would be ‘income.’ They would be trading income, but whether they are table is a more complex question.
Q: If the organisation is a mixture, and its activities are a mixture of 18A and non-18A, do the funds have to be in separate bank accounts?
A: Best practice is always to keep them separate when dealing with s18A’s, though it is not a requirement.
Bonus Info: Should all receipts be 18A?
Donations can come from various types of donors and places:
- Overseas individuals,
- overseas donor organisations,
- SA foundations/donor organisations,
- SA corporates,
- SA individuals and
Which of these need 18A receipts? Should we just issue 18A receipts to all?
Because an 18A receipt is only useful to a South African taxpayer (it doesn’t work anywhere else), you only need to issue 18A receipts to
- SA corporates and
- SA individuals
The rest need an ordinary receipt/other acknowledgment Because you have to keep special records of 18A receipts issued and their total value, it is best only to issue them when you have to.